As signs grow that the high exchange-rate trend may be prolonged, money is rapidly flowing into “dollar parking” products that can target both higher interest income and foreign-exchange gains rather than simple currency exchange. In particular, returns on dollar-based money market fund (MMF) exchange-traded funds (ETFs) are overwhelming won-based products, emerging as a new refuge for idle cash with nowhere to go.

According to the Korea Exchange on Thursday, an unusual phenomenon is unfolding in which returns on MMF ETFs that invest in dollars are about eight times higher than those of won products. KODEX US Money Market Active, a representative dollar parking product, posted a 10.49 percent return over the past six months as of Dec. 10, ranking first among domestic short-term cash (parking) ETFs. Its one-month return was tallied at 1.69 percent.

Over the same period, won-based MMF ETFs such as SOL Money Market Active and TIGER Money Market Active posted one-month returns of only 0.18 to 0.22 percent. Their six-month returns also stayed in the 1.20 to 1.30 percent range, widening the performance gap to at least 8.3 times compared with dollar products.

Two factors are working at the same time behind the gap: the interest-rate differential and the exchange-rate effect. The U.S. benchmark rate is currently 4.00 to 4.25 percent, much higher than South Korea’s benchmark rate of 2.50 percent. The structure allows investors to earn higher interest income than in won simply by holding dollars. On top of that, the won-dollar exchange rate has continued its run toward the 1,500 won level, adding sizable foreign-exchange gains.

Retail investors have responded strongly. Net assets of KODEX US Money Market Active, the only dollar-based MMF product in South Korea, jumped to 521.2 billion won as of Thursday from 151.9 billion won on its listing day on May 13. Its size has grown by more than 2.5 times in just over six months. The product can deliver the effect of investing directly in the U.S. short-term funding market in dollars without currency exchange, making it an attractive option for investors seeking to bet on exchange-rate volatility.

It is not the only one. ETFs that use dollars to pursue returns linked to the Secured Overnight Financing Rate (SOFR), a U.S. risk-free benchmark rate, are also gaining popularity as they post high returns. Recent one-month returns for RISE US Dollar SOFR Rate Active (Synthetic) at 10.09 percent and PLUS US Dollar SOFR Rate Active (Synthetic) at 10.07 percent have been around 2 percent. That is nearly 10 times higher than the return of products tracking the Korea Overnight Financing Rate (KOFR) at 0.22 percent.

The reason money is flocking in is clear. With the KOSPI undergoing a corrective phase and stuck in a range, and even U.S. equities seeing greater volatility on concerns such as an artificial intelligence (AI) bubble, idle cash that cannot find a suitable investment destination is moving into the “strong dollar,” seen as a safe asset.

Market attention is now focused on the direction of the exchange rate. Experts are placing weight on the possibility that the high exchange-rate trend will persist for the time being, while also viewing the U.S. Federal Open Market Committee (FOMC) meeting scheduled for Thursday as a major watershed.

Uncertainty from tariff talks between South Korea and the United States and safe-haven preference tied to an adjustment in the AI industry are still factors supporting dollar strength. In particular, some analysis points to dollar demand not easing easily because repo rates, a sign of tightening liquidity in the U.S. short-term funding market, remain elevated.

Still, voices are growing that investors should be cautious about rushing into chase buying. With the exchange rate already nearing the psychological resistance level of 1,500 won, there could be wariness of authorities’ intervention and profit-taking selling, they say.

Amin Kwon, an analyst at NH Investment & Securities, said, “Unlike in the past, real demand for dollars based on expectations of a higher exchange rate is solid, so the exchange rate is unlikely to fall easily.” He added, “A meaningful downtrend in the exchange rate will appear only after external factors are confirmed, such as the United States cutting rates in December and ending quantitative tightening (QT), or a brake being applied to the Trump administration’s tariff policy.”